Flashy signing bonuses are often associated with all-star athletes being lured every which way. But the sports world isn’t alone in using such incentives to sweeten the pot for top talent.
Paying high-dollar bonuses for in-demand real estate agents and loan officers to jump ship isn’t nearly as prevalent as it used to be, but there are exceptions. And now, lenders and real estate brokerages are attempting to steal the competition’s top performers by offering other perks, including higher commission splits and office amenities.
The pressure to recruit in some cases has only heightened as real estate brokerages in particular contend with slim profit margins.
‘Everybody is recruiting’
Back in the heyday of the mortgage business, when Kevin Hawkins (now president of Wav Group Communications) was a top producer in his Bainbridge Island, Washington, market for Wells Fargo, he was romanced away with a $10,000 signing bonus from now-defunct Countrywide Home Loans.
Three years later, Chase Home Mortgage came calling for Hawkins, this time with an $8,000 bonus.
Neither checks were as large as what’s often offered to, say, a slick fielding shortstop or speedy running back, but Hawkins says “there were much bigger bonuses than I got. I heard that one guy got $1 million.”
John H. P. Hudson, a vice president at Mortgage Financial Services in San Antonio, says he was once offered a $50,000 sign-on bonus. “I get hit up every single days and I don’t even originate anymore,” he said.
Hudson has heard of large production teams being offered six figures to switch companies. But the more typical bonus is in the $25,000 range, he says.
Just the other day, he received an e-mail offering a commission of 250 basis points, or 2.5 percent. “Who pays for that in the end?” he asks, and answers himself: “There no question it’s the consumer.”
“Recruiting is as fierce now as it has ever been,” Hudson added. “Since production is down nationwide, it seems everybody is recruiting.”
Modern recruiting incentives
Promising ‘the stars and the moon’
One of the most aggressive recruiters recently has been Compass, a New York real estate brokerage that used to be known as Urban Compass. Over the last few years, the company has embarked on a nationwide expansion, recruiting top producers along the way. It now has 30 offices nationwide, making it “among the largest luxury brokerages” in the land.
Compass declined to be interviewed for this story. But according to sources in the real estate community, the company “promised the stars and the moon” to top agents as it expanded from its Big Apple office in 2013.
Said one person familiar with Compass’s enterprising expansion plan: “I have heard that Compass offers both signing bonuses and much, much larger commission splits. When it opened an office in San Francisco, a couple of numbers thrown around that I’ve heard attached to the recruiting efforts there included $500,000 signing bonuses for specific agents plus the promise of a 90/10 commission split.”
According to press reports, Compass, looking to disrupt the current practice of exclusive listing contracts, also offered an unheard of “key-person clause” that allows agents to take their listings with them should they leave.
Tech offerings as bait
Last year, Blu Skyy Realty of Virginia Beach went on an extensive recruiting campaign to support the agency’s growth in Virginia and beyond. The main perk offered by the brokerage was a package of cloud-based software tools. That way, the company promised, agents could nurture thousands of leads at the same time, all through the power of automation and predictive technology.
Blu Skyy said the platform helps agents earn revenue without spending excessive time creating, managing and optimizing campaigns or communications. “Our culture is agent-centric because we believe happy agents lead to satisfied buyers and sellers,” said CEO and Chief Innovation Officer Frank Tommaso.
But the company also offers other unusual goodies, including an 80 percent commission split from day one that slides to a full 100 percent after passing “a low annual cap.” Also, agents who mentor less experienced colleagues and guide them through their first few deals earn a mentor commission for each transaction.
The Blu Skyy referrals program is another extra revenue source for agents, who can earn $10,000 for every agent referred to the company. And agents also receive retirement benefits, which is practically unheard of in real estate circles.
A slice of loan payments
To retain and attract loan officers, another Virginia Beach firm, the Atlantic Bay Mortgage Group, last year put into place a progressive earnings plan to reward their top producing loan officers.
The plan creates a continuous income stream by paying loan officers a percentage of loan payments as long as the mortgage remains in place and payments are current. “I like to explain it as if it were the music industry,” said Rebecca Chaney, Senior Executive VP of Legal Affairs at Atlantic Bay. The loan officer “receives a ‘royalty’ check every month for the loans they originate.”
Eligibility for the “Progressive Earnings Plan” requires originating more than $14 million in retail loan volume in a calendar year. The loans must also be closed in the name of and funded by Atlantic Bay, which currently services over 65 percent of its loans.
According to the company, a loan officer with $15 million in originations per year could earn $3,800 from those originations in one year under the annuity plan. An agent with $50 million in originations per year could earn $13,000 from the loans in the first year of the plan.
Getting paid for new recruits
At Exit Realty, which now has an estimated 600 offices in the U.S. and Canada, the company’s bonus structure pays 10 percent of a new recruit’s closed transaction gross commissions to the agent who recruited the new agent into the company.
The bonus, which is capped at $10,000 per recruit, is paid every year that the recruit stays with the company. The money comes from Exit’s home office, not as a slice of the new agents’ earnings.
To attract new business from independent mortgage brokers, United Wholesale Mortgage is offering seed money, in the form of grants of up to $10,000, for brokers to open up their own shops. The grant, which does not have to be repaid, is intended to cover such startup costs as office space and software technology that makes it possible for them to accept loan applications.
United Wholesale is the first sponsor for an effort to grow the mortgage broker channel by the National Association of Mortgage Brokers, aka the Association of Mortgage Professionals. United also provided $500,000 to get the “KickStart” effort off the ground.
Customized marketing, training, and other work perks
Sometimes, the incentive isn’t monetary at all. Related Realty in Chicago aggressively recruits agents by offering, among other things, customized marketing strategies.
Matt Curtis Real Estate in Huntsville, Alabama, uses other tools to attract and retain agents.
“We provide the right balance of not meeting for the sake of meeting and quick weekly one-on-one check-ins to provide quick course correction when needed,” said agency owner Matt Curtis.
“We offer optional training that focuses on advanced buyer and seller psychology that you can’t find in your typical real estate training. We also provide all of the things agents do not enjoy doing, like listing sign installation, installing 50 open house signs for an open house, listing input, marketing, and closing coordination,” Curtis added.
Curtis also offers his agents a series of perks including trips to Six Flags, a food truck party and a pool party at Curtis’s home. The next planned outing is a zipline excursion.
And there’s these office extras: A free snack bar, Keurig machine, weekly team lunches, team margarita machine, free beer, a ping-pong table and a PS4 on a 96-inch projector. Other Curtis perks include gift cards for agents who achieve their goals, a free vacation for those achieving record sales and free concert tickets for top performers.
The wrong kind of incentives
There is a right way and a wrong way to transition a new recruit from one firm to another — as one lender recently learned.
According to Ari Karen, a partner at The Offit Kurman law firm in the Mid-Atlantic region who specializes in labor and employment law, a recent California jury’s decision cost a recruiting lender $25 million because the company “encouraged its new hire by attaching a bonus to the initial period of employment for engaging in actions constituting a data breach.”
Karen says experience shows that in most cases, departing employees or agents show little consideration of the fiduciary duties owed to the prior company, nor the fact that most of the information they have access to may be considered trade secrets or information proprietary to that employer.
He also says that hiring companies similarly often fail to acknowledge the role they can play in promoting or incentivizing such practices.
Lew Sichelman’s weekly column, “The Housing Scene,” is syndicated to newspapers throughout the country.